Vast differences in state tax rates, public debt, and labor market regulation are producing two distinct national economic recoveries: a more robust one in low tax states in the south and west, and a much slower one in high tax states in the northeast, Midwest and California.
In "Rich States, Poor States," the American Legislative Exchange Council (ALEC) and well-respected economists Art Laffer and Steven Moore examine each state's economic performance in areas such as GDP growth, employment, and domestic migration, all factors that are heavily influenced by state policies.
Looking forward, they examine factors influencing future economic growth, such as public debt, the tax burden on individuals and employers, and other powerful variables.
While Democrats in state capitals such as Sacramento and Albany are busy patting themselves on the back for the great job they're doing, the ALEC report puts big, expensive states like California, Illinois and New York at the bottom of the list for economic performance and outlook. It casts doubts about prospects for reducing unemployment creating economic opportunities for millions of Americans.
California's economic outlook ranking plunged from #38 in 2012 to #47 today, placing it among the states with the worst economic outlook in the year ahead. Only Illinois (48), New York (49), and Vermont (50) fared worse. Voters narrowly passed multiple tax increases at the ballot box in 2012, further increasing the state's total tax burden as well the progressivity of its income tax.
California provides a particularly noteworthy example of the impact bad economic policy can have in breaking up families. Since 2001, the state has endured net domestic out-migration of over 1.5 million people. This means children moving away from parents, parents moving away from grandparents, and other dislocations caused by the state's problematic economic opportunity deficit.
Like other high tax states, California has become a common target for governors from other states to swoop in on economic development tours to persuade CEOs to move or expand their businesses to states with more reasonable tax and regulatory burdens. Texas Gov. Rick Perry has made quite a number of California politicians unhappy with his frequent visits with California CEOs.
While the economy nationally continues to grow, albeit slowly, the recovery is uneven. The ALEC report directly correlates economically burdensome state-level policies with economic growth and opportunity.
Ron Nehring is a Republican strategist and Vice Chairman of the Republican Party of San Diego County. He was twice elected to lead the California Republican Party, serving as Chairman from 2007 to 2011. Follow him on Twitter at @RonNehring.
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